As the European session began the Pound began to lose ground against the US Dollar and Euro as investors speculated on the likely outcome of the Bank of England’s inflation report.
The British currency trimmed advances made yesterday in the wake of stronger-than-anticipated UK industrial production and housing figures.
The Pound Sterling to Euro Exchange Rate was in the region of 1.1608 as of 12:45 GMT
1 Euro is currently worth 0.8614 pence
In his first major test as Governor of the BoE Mark Carney was expected to outline interest rate forward guidance – and he didn’t disappoint.
Sterling edged further away from its one week-high against the US Dollar and extended declines against the Euro as the BoE linked its interest rate outlook to inflation and unemployment for the first time.
In an unprecedented step, the central bank asserted that it intended to maintain its current policy until the unemployment rate reaches 7 per cent. As the unemployment rate currently stands at 7.8 per cent, reaching this level could take some time. The BoE believes that unemployment won’t dip to this level until at least the third quarter of 2016.
The institution then stressed that they would be using the unemployment rate as a guide for policy reassessment only, and that the key rate won’t be raised automatically even if the labour market improves. It was also intimated that the current level of assert purchases could be expanded if necessary.
The GBP/EUR exchange rate hit a low of 1.1412
The BoE asserted: ‘The Monetary Policy Committee judges that, until the margin of slack within the economy has narrowed significantly, it will be appropriate to maintain the currently exceptionally simulative stance of monetary policy. Framing guidance in terms of the likely response of monetary policy to economic developments [as oppose to pegging it to a specific time line] will make it more effective. […] The action taken by the committee would depend on its assessment of the appropriate setting of monetary policy required to fulfil its remit to price stability.’
UK growth projections for 2013 and 2014 were also raised to 1.5 per cent and 2.7 per cent from previous estimates of 1.2 per cent and 1.9 per cent respectively.
Inflation is expected to cool slowly and hit the 2 per cent target before the close of 2015.
Sterling’s decline against the Euro was exacerbated as the common currency strengthened in reaction to unexpectedly strong German industrial production data.
The Pound hit a low of 1.5205 against the US Dollar.
However, the British currency went on to rebound, pushing above 1.54 against the US Dollar and 1.16 against the Euro.
Current Pound Sterling (GBP) Exchange Rates:
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The Pound Sterling/US Dollar Exchange Rate is currently in the region of: 1.5438 >
The Pound Sterling/Euro Exchange Rate is currently in the region of: 1.1608 >
The Pound Sterling/Australian Dollar Exchange Rate is currently in the region of: 1.7286 >
The Pound Sterling/New Zealand Dollar Exchange Rate is currently in the region of: 1.9572 >
The US Dollar/Pound Sterling Exchange Rate is currently in the region of: 0.6473 <
The Euro/Pound Sterling Exchange Rate is currently in the region of: 0.8614 <
The Australian Dollar/Pound Sterling Exchange Rate is currently in the region of: 0.5786 <
The New Zealand Dollar/Pound Sterling Exchange Rate is currently in the region of: 0.5166 >
(As of 12:45 GMT)
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